Jump to content
sschullo

Are Millennial Investors Smarter than Baby Boomers?

Recommended Posts

Arguing about intelligence is an unsustainable activity, especially between generations. And as I have said in another discussion, we don't know how these young people will do in the future. But the evidence is very clear about what a small part of them, FIRE and FI, are doing right now. Unlike my generation, they are reducing spending, learning financial literacy, setting financial and life goals for the purpose of FIRE or FI unlike my boomer generation have never done. But to be fair, the tools and information available now to Millenials were not available to Boomers 40 years ago. Heck, the first index fund by Jack Bogle was released in 1975 when I was 27 years old. Instead of criticizing these young folks because of unknown "realities", I think we should encourage them with a huge slap on the back for thinking about everything financial at a young age. Just reducing spending goes a long way in the right direction for their financial future. 

http://www.morningstar.co.uk/uk/news/171760/are-millennial-investors-smarter-than-baby-boomers.aspx

EXCERPT:  Digital advice is the latest step in small-investor diversification. First came the single stock. It was followed by the single, actively managed mutual fund, which eliminated the possibility that the security would go to zero. Then came the index fund, which removed manager risk. Now there are digital-advice portfolios, which combine multiple index funds. Not all steps were equally important - the shift from stock to fund being the largest of the jumps - but all were improvements.

No more market timing or trying to predict the future because it is futile. Millennials get it. Excerpt: Also encouraging has been the demise of market prognosticators. Admittedly, that puts the matter too strongly: there remain those who prophesy the stock market's future. But they are far less visible than in the past. Back in the day, moderators customarily asked investment "experts" where the Dow Jones Industrial Average would be 12 months later. The question was routine. Today, it is not. Millennials don't believe the answers.

Excerpt: None of this is to suggest that millennials will achieve financial success. They may even fare worse than my baby boomer generation
, when all is said and done. But the early indications are positive. In becoming warier about spending, or at least, discussing the issue, adopting digital advice, and moving from stock market forecasts to more-meaningful investment discussions, younger investors seem to have learned from their elders' mistakes.

The tremendous positive energy by organizing themselves in many supportive groups all over the country is truly infectious. They are not just THINKING about this.  

 

Share this post


Link to post
Share on other sites
On 11/16/2018 at 12:30 PM, sschullo said:

The tremendous positive energy by organizing themselves in many supportive groups all over the country is truly infectious. They are not just THINKING about this.  

 

Steve,

Join me on the organizing effort. What do you think it'll take? Teacher-oriented facebook groups? Podcasts? Networking with teachers on social media? What's the name of the movement: Wise Teachers? FIT Forum? 

Share this post


Link to post
Share on other sites

Hi Moe,

All of the above, don't forget twitter and linkedIn. But hands down, our teachers respond best with face to face. The annuity sales force has known this since 1961. Teachers have never really embraced much online especially anything financial. Very rarely does a teacher come here and ask questions. I use my FB page to disseminate financial stuff and its the same 4 or 5 people, mostly nonteachers who like what I post. 

And even face to face is limited because there is NO support after the workshop or seminar. 

We have a huge challenge because the only people who can take it face to face are the annuity sales force. 

If we can find a solution to connect with more teachers with our message, WOW! change will happen because the stage has been set for years. Many financial print media reporters, more attorneys, the Security and Exchange Commission, the Consumer Federation of America, and more fiduciary financial advisers are joining our side to reform the 403b. 

Steve

 

Share this post


Link to post
Share on other sites

Well, if it's one teacher a day, that's one more than yesterday. It's true that the law and regulations need to be revised but something else has to be done in the short-term. 

Share this post


Link to post
Share on other sites

In most cases, nothing is stopping the individual teacher from investing in low cost funds in their 403b/457b. I got Vanguard and Fidelity added to our vendor list and lots of other districts have one of the top 5 vendors or a quality state sponsored 457b on their list already. The obstacle here is getting the individual to care.

A legislative solution for the collective has a lot of obstacles.

Moe, I encourage you to get to work! I think Steve is right about the value of face-to-face organizing/communicating. I’m a software engineer and not being able to do that the way a teacher can is my biggest roadblock.

Share this post


Link to post
Share on other sites
23 hours ago, EdLaFave said:

The obstacle here is getting the individual to care.

 

Yes, that's true. The other obstacle is getting them informed. In a country where you have to be credentialed to cut hair and apply nail polish, logic is trumped by initials. 

Share this post


Link to post
Share on other sites

Meaning, too often I see people asking for credentials (initials after their name) and will discount the logic of others who know from experience or self-education. Lay people think, for example,  if you aren't a certified financial advisor you aren't qualified to know as much about investing. Of course, we know better though. Perhaps I am limited by that notion based on the number of teachers I see who hear the message about fee-laden 403b's but listen to the advisors anyway. They have "initial-bias".

Does that make sense? It's getting late for this teacher...

Share this post


Link to post
Share on other sites

I gotcha.

It’s tough for the individual. In my experience, the generally agreed on wisdom is often terrible. So I understand the desire to turn to a pro. However, my experience also tells me the median pro is also terrible. Seems you have to become an expert in everything, which is why the internet is amazing!

Share this post


Link to post
Share on other sites
On 11/19/2018 at 9:49 PM, MoeMoney said:

Meaning, too often I see people asking for credentials (initials after their name) and will discount the logic of others who know from experience or self-education. Lay people think, for example,  if you aren't a certified financial advisor you aren't qualified to know as much about investing. Of course, we know better though. Perhaps I am limited by that notion based on the number of teachers I see who hear the message about fee-laden 403b's but listen to the advisors anyway. They have "initial-bias".

Does that make sense? It's getting late for this teacher...

Moe

You are on it exactly .  That is the problem.  I had the same issues . I tried logic to convince other teachers to pay attention to fees and to choose better vendors but many looked at me like I was an Idiot because I did not have PHD, or CFP etc.etc after my name. That's exactly right but its not just teachers. Everyone trusts and believes the experts  who are often just sharks after your money. Titles before or after your name have a strong pull on most folks but I have known bad doctors, bad lawyers, and certainly bad financial advisors all with titles. Its really unfortunate that the facts are often not enough to get folks to do the right thing for themselves  You need to be branded like a product to be taken seriously with some folks.  And the truth of the matter is you don't even need an expert to figure this stuff out.  Teachers should be a natural at researching information but often they want an "Expert" to do it for them.

 

Share this post


Link to post
Share on other sites

I try to talk to anyone at work about low cost investing who will listen, without being too annoying about it.  I tend to get different vibes from younger and older teachers.

The under 40 crowd seems hesitant to tie up money (all the way) until retirement. It just seems so far off for them. They are busy getting married, raising families, buying a house, getting a masters degree, etc.  Investing for retirement is a lower priority for them, and they tend to put it off, missing out on years of compounding.

The over 40 crowd at my school seem fearful of doing it on their own.  I often get questions like, "You mean you pick your own investments?!?".  Me: "Not really, I pick an index fund that fits my needs and costs me about 0.14% annually instead of the 2% you're paying."

We do have Vanguard and Fidelity as choices for our 403B.  We have about 500 total employees in our district.  When they showed us the stats of most popular  vendors (about 2 years ago), I was the only one using Vanguard and about 5 people were using Fidelity.  About 200 were using variable annuities and about 300 were deferring nothing.  And we have a small employer match after 5 years!  I just don't know what the answer is to help people help themselves.

 

Share this post


Link to post
Share on other sites
5 hours ago, MNGopher said:

 "Not really, I pick an index fund that fits my needs and costs me about 0.14% annually instead of the 2% you're paying."

When I start saying something like this I notice eyes quickly glaze over.  The mention of index funds and percentages is enough for people to decide. “Ok, this is over my head.  It’s worth the 1% to put this in the hands of a “professional”

 

5 hours ago, MNGopher said:

I just don't know what the answer is to help people help themselves.

This is my thought exactly.  I think people will help themselves when they’re ready.  I sent an email out about a year ago and I’m starting to get a few emails now.  I’ve helped three people set up self direct accounts.  I’ve had quite a few people say they wanted to talk to me about it when they get more time but then they never mention it again. 

Share this post


Link to post
Share on other sites

A concern of mine with helping someone set up a self direct account is once the market starts taking and they start placing blame.  Index funds of course go down too.  Maybe with a professional this wouldn't happen they might think?

Too risky to help someone set up an account.  There has to be SOME desire to read, learn and ask questions before self directing.   I would say it might be slightly uncomfortable when a 2008 occurs and everyone comes running back to complain about their "low fee" index funds.  ( they wouldn't know that their "high fee" funds would have done just as bad)

 

 

Share this post


Link to post
Share on other sites
1 hour ago, jebjebitz said:
7 hours ago, MNGopher said:

I just don't know what the answer is to help people help themselves.

 

 

. You can lead a horse to water but .............  well you know how the saying goes. Part of the problem is most Americans have not been taught enough financial literacy and economic principles throughout  their school years and probably, most likely didn't have role models at home who could have instilled some financial knowledge in them as most families are financially ignorant. We have been taught more useless facts in school than useful information. It has to start in Kindergarten. My wife is a perfect example. She's amazing at answering Jeopardy trivia on TV (much better than me by a mile) but doesn't know much about building wealth. Our educational system is at the root of the problem. Folks simply don't know any better because they have not been carefully taught on things that matter. I feel I always had a natural acumen towards money management probably because I grew up in an immigrant one salary non- English speaking family. When you have to be frugal out of absolute necessity it lights a fire ( FIRE!!)under you to improve your life. Some of my friends grew up much too comfortable to feel motivated to cross that bridge that I had to cross.  My dad always would say to me that when a populace is no longer "hungry" (because they have reached basic needs )they lose their motivation to succeed further.  I agree with that. I've seen that happen. I  think teachers are not, generally speaking, an overly ambitious lot. They have a tendency to be happy with the salary and focused only on current challenges. Its also human nature to think that retirement is too far off to worry about. Some folks just don't think they will get old. We can go on and on with this discussion but the truth of the matter is if teachers don't care about their own future and their family's future than why should anyone else?  You can't put all the abuse that is occurring in the 403b world solely on the insurance companies. Teachers are indirectly complicit. 

I did all I could do to light a fire under the teachers and I got  Vanguard, Aspire, and a state 457b plan added to our provider choices. To this day teachers are still mostly going the annuity route much to my chagrin. I am losing interest in helping folks who don't want to help themselves. Sorry if this sounds harsh.

Share this post


Link to post
Share on other sites
43 minutes ago, Bashdash said:

A concern of mine with helping someone set up a self direct account is once the market starts taking and they start placing blame.

Yup, it happened to me

This shows that they are basically ignorant of financial basics. The fact is that they don't understand how financial markets work, and are lacking in knowledge so they are prisoners of their emotions.

I signed up a bunch of folks in Vanguard and other good choices. When the funds started losing money they flipped out on me and blamed me for putting them in a target fund. They expected things to only go up in value. They started cursing me and Vanguard and some found refuge in annuity sharks who pulled them out of their "bad"  Vanguard choice and ultimately the teachers found themselves in something much worse with special benefits like  much higher fees and surrender charges. Predictably irrational behavior. 

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×